In Depth

What is universal credit?

Government’s flagship welfare project aims to simplify benefits system but has been beset by controversy

Universal credit, the government’s flagship welfare reform project, is facing mounting opposition both in Parliament and among the public, leaving its long-term future in doubt.

The concept of universal credit, first announced in 2010 by Iain Duncan Smith, work and pensions secretary at the time, enjoyed cross-party support but its rollout has come under fire amid delays and cuts to payments.

The new single monthly payment is said to mark the biggest overhaul of the benefits system in 60 years. So what difference will it make and when will it come into force across the country?

What is universal credit?

It is a new type of financial support for people on a low income or looking for work. The single monthly payment will eventually replace six other benefits and tax credits, including: income-based jobseeker's allowance; income-related employment and support allowance; income support; child tax credit; working tax credit; and housing benefit.

Why is it being introduced?

According to the government, universal credit will bring greater fairness to the welfare system by “ensuring that people are better off in work than on benefits”. Duncan Smith said that the old system reduces the financial incentives of taking a job as it is difficult for claimants to take on short-term or part-time work without losing all their benefits at once. Universal credit gradually reduces as claimants earn more, with no limits to the number of hours people can work in a week.

In encouraging more people to move into work, it is also intended to reduce the benefits bill – savings which will only be increased by cuts to the payments under the system.

How will it work?

The new system is supposed to be simpler and encourages claimants to take more responsibility for their own money. It will generally be managed online rather than at a job centre and in most cases, a single amount, made up of all the various elements, will be paid directly into the claimants’ bank account each month, rather than weekly or fortnightly. Tenants who need help with rent will be paid directly, rather than the money going straight to their landlord as before. Those applying for universal credit will also have to sign up to a “claimant commitment” which sets out their responsibilities, such as doing everything they reasonably can to find work. Anyone who fails to stick to the contract without good reason may face sanctions.

When will it be introduced?

Universal credit is being introduced gradually across different geographical areas and claimant groups, such as single people, couples and families. It was first introduced in selected trial areas in April 2013 and is now being introduced across the country for new unemployment benefit claimants. The roll-out was due to be complete by 2017, but ongoing delays to the programme mean it is now not due to be fully operational until December 2023.

Who are the winners and losers?

A report from the Institute of Fiscal Studies (IFS) in 2016 described it as a mixed bag. “An estimated 2.1 million families will face an average loss of £1,600 a year, while 1.8 million will gain an average of £1,500," said the BBC.

In terms of specifics, the institute's figures show 1.1 million homes with no one in paid work will lose out by about £2,300 a year, while 500,000 will gain £1,000. Working single parents are said to face an annual loss of £1,000, while The Guardian notes one-earner couples with children would gain more than £500 a year.

How does that compare to its stated aims?

The government has always said no individuals will lose money as a result of the changes, with new claimants to be helped by transitional support.

That hasn't satisfied critics, however, who point to losers among the lowest paid compared to the current system, especially among working families.

Last week, the current Work and Pensions Secretary, Esther McVey, finally admitted that some families will be “worse off” under the new system.

While the long-term benefits of the scheme have come under intense scrutiny, much of the criticism has been focused on the immediate impact of the transition from the old system to the new.

A study by Citizens Advice found a quarter of claimants had fallen into arrears because they hadn’t received their first full payment on time.

It came just days after a series of whistleblowers said universal credit is so riddled with design flaws and process faults that it is practically guaranteed to generate mistakes and delays that will push vulnerable benefit claimants into hardship.

What other criticism has it faced?

In June, the National Audit Office accused the government of presiding over a catalogue of errors. It said the rushed implementation was pushing claimants into financial hardship, while it was failing to deliver value for money.

The independent auditor said it had “significant doubts” the stated aims for the reforms can ever be achieved, and also revealed that the new benefits scheme could end up costing more than the system it replaces.

The NAO clashed with the government again in July after it was revealed McVey had mislead MPs when she had falsely claimed the auditor had asked for an accelerated roll-out of the government’s flagship welfare programme.

Her comments drew a stinging rebuke from NAO auditor general Sir Amyas Morse and calls for McVey to resign.

McVey has also faced questions this week after veteran Labour MP Frank Field wrote to her warning universal credit is driving women into prostitution.

HuffPost reports that Field’s “startling claim was made as the government comes under repeated attack for the disastrous rollout of Universal Credit and as its architect, Iain Duncan Smith, calls more money to be invested in it”.

So what now?

On Monday, McVey told the Commons that she had been discussing universal credit with Chancellor Philip Hammond, the details of which would be revealed in the Budget next week.

However, the BBC reports that “ministers have bowed to pressure and are planning to further delay the rollout of the flagship welfare reform”.

Leaked documents seen by the broadcaster also reveal plans to spend hundreds of millions of pounds to prevent claimants suffering hardship as they move on to the new system.

But those hoping the scheme could be scrapped altogether are likely to be disappointed.

Taking a somewhat resigned tone, Sir Amyas Morse told HuffPost in July that because the scheme is so massive and complex “there is really no practical choice but to keep on”.


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